In recent years, the automotive landscape in China has witnessed an intense competition, particularly among joint venture brandsOne of the frontrunners, FAW-Volkswagen, a collaboration that includes well-established marques like Volkswagen, Audi, and Jetta, has enjoyed a significant market shareDespite its success and being recognized as the brand with the highest sales volume among joint ventures, there are palpable underlying issues that the company faces, particularly as market dynamics shiftThis could be seen with the latest launch of the ninth-generation Magotan, which, despite substantial advancements in design, performance, and smart technology, has not garnered the anticipated consumer response.

The ninth-generation Magotan is a notable shift as it arrives eight years after its predecessorThis new iteration, while making comprehensive improvements, was introduced alongside the eighth generation, suggesting that FAW-Volkswagen aimed to cushion potential market volatility typically associated with a model changeHowever, even with this strategic buffer, terminal sales data shows that the new Magotan underperformed; in fact, the overall sales dropped by 7.6% in 2024 compared to the previous year, with figures reflecting 175,000 units soldComparatively, a direct rival, the SAIC Volkswagen Passat, reported an impressive increase in sales, exceeding 260,000 units, marking a robust growth of 22%.

In light of a general decline in market share for joint ventures, FAW-Volkswagen posits that the Magotan's overall performance fits within a normal fluctuation range

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However, digging deeper into the numbers reveals a different pictureThis ninth generation marks a historic moment as it is the first model in the series to be sold concurrently with its predecessor since its introduction to the Chinese market back in 2007. With seven months post-launch under its belt, the ninth-generation Magotan has yet to contribute significantly to the sales total, representing less than half of the division's figures.

One major consideration is whether the downturn in sales is predominantly tied to the ninth-generation modelFAW-Volkswagen has yet to provide a straightforward answer to this, though the company has historically excelled in the combustion vehicle sector, achieving remarkable success with a variety of popular modelsAs the firm pivots towards smarter, more technologically advanced models, the performance of the all-new Magotan will be critical in maintaining its legacy as a beloved manufacturer.

The new Magotan struggles as the old one retains strength

Amid rising competition in the automotive sector, autonomous brands such as BYD, Geely, and Changan have rapidly captured market share in the compact car segment by leveraging a price advantageThis pressure forces joint venture brands to seek growth in higher-end marketsFAW-Volkswagen positioned the ninth-generation Magotan in line with these shifts, hoping to strike a balance between price, features, and market presence.

As the first car under the brand's “dual intelligence” strategy, expectations were high for the new Magotan

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It boasts significant advancements concerning aesthetic appeal, roominess, power, and configuration, accompanied by a price strategy aiming to undercut its predecessorOfficially, the new Magotan's price range begins at ¥179,900 and tops out at ¥246,800, whereas the previous generation's pricing ranged from ¥189,900 to ¥316,900 eight years agoWhile lowering prices and increasing features worked as a winning formula in the past, it seems to be faltering with the once-popular Magotan now criticized for its shortcomings.

Dealerships have now begun displaying both generations of the Magotan prominentlyConsumer feedback indicates a clear preference for the older generation, which still resonates with a considerable demographicIn regions such as Hebei and Shandong, the sales split between the two generations stands at roughly 30% for the new model versus 70% for the older iterationEven in major cities like Beijing, the contribution from the ninth generation hovers at a maximum of 50%.

According to data provided by FAW-Volkswagen, the proportion of sales from the new Magotan within its family has been logged at 46%, 50%, and 44% over the past three monthsOfficials from FAW-Volkswagen have stated that the strategy of selling both generations simultaneously has proven successful for luxury brands, with the older Magotan appealing to traditional values while the newer model emphasizes smart features, thus catering to varied consumer needs.

While concurrent model sales have historically benefitted brands such as Hyundai and Toyota, this trend often sees the older version relegated to a secondary role

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However, it's essential to note that this strategy can backfire, leading to unclear product lines and potentially diminishing brand power.

FAW-Volkswagen believes extending the production timeline of the eighth-generation Magotan enhances their product portfolioWhile the B8 model emphasizes timeless value, the B9 focuses on intelligent experiences, enhancing competitivenessStill, caution is warranted, as an over-reliance on this strategy might confuse consumers and weaken the marketing of the new model, especially in fiercely competitive markets.

Insights from sales representatives suggest the B8 model, specifically the 330 luxury variant, remains the primary seller, while the B9 primarily relies on the 380 premium variant for salesPrice differences exist, yet the preference appears to stem from the older generation’s design and features, particularly among consumers aged 40 and above who dominate the customer demographicDespite efforts to inject youthfulness into the new model, it hasn't captured significant interest from younger buyers.

Sedans underperform, reaching a decade-low in sales

Traditionally, a flagship model’s failure in a car company can precipitate broader challenges, affecting performance metrics like sales volume and profit, while simultaneously questioning brand positioning and possibly instigating strategic overhauls

For FAW-Volkswagen, the Magotan is a pivotal model; in 2017, prior to the onset of the SUV boom, they achieved impressive figures solely from sedans.

In that year, utilizing a lineup that included the Sagitar, Jetta, Bora, Magotan, CC, and Golf, the company recorded an impressive 1.405 million units soldEven after the addition of SUVs like the T-Cross, Tayron, and more, sedans still account for a lion’s share of sales that helped FAW-Volkswagen surpass its SAIC rival.

Despite the explosion of the SUV sector in 2024—reportedly achieving cumulative sales of 11.31 million, eclipsing the sedan market's 10.49 million—the status of sedans in FAW-Volkswagen remains formidableAccording to third-party statistics, in 2024, FAW-Volkswagen managed to sell 590,000 sedans, in contrast to 286,000 SUVs; while this is a significant decrease from previous years, it underscores the brand's profound reliance on the sedan segment.

In 2024, however, FAW-Volkswagen slipped into its lowest sales performance in a decade, recording a total of 928,000 units sold, a drop of 11.6% from the previous yearSales data from third-party resources reflect troubling trends; with the exception of the newly launched fully electric ID.7 VIZZION, all other available sedan models faced declines ranging from 8% to 42%, starkly contrasting with a modest growth rate of 1.8% in the overall sedan market.

Optimizing product structure and fostering brand youthfulness

To tackle these pressing challenges, a spokesperson from FAW-Volkswagen conveyed the company's commitment to progressively shift from relying solely on blockbuster models to a diversified "product matrix" competition model

They plan to optimize their product structuring, aiming for simultaneous growth in both sedan and SUV markets to stabilize overall performance.

In practical terms, alongside the recently launched ninth-generation Magotan, the Tiguan L is projected to debut around late March to early April 2025, while the Sagitar L is set for a complete refresh in the third quarter.

According to company representatives, the transformation will accelerate from the new Magotan onwards, with a complete upgrade of fuel-powered vehicles slated by 2026—a move that would certainly be distinctive among domestic automakers aiming to strengthen their positioning in the combustion vehicle market.

Additionally, the Volkswagen brand plans to introduce a range of electrified models, including pure electric, extended-range, and plug-in hybrid options, leading to a more diversified offerings by 2026. Nevertheless, navigating the increasingly fierce competitive landscape poses significant challenges." We recognize that the pressure from price wars and competition from autonomous brands, which are already introducing advanced smart driving features in models priced below ¥100,000 is intensifying.

As per the vehicle market information joint working group of the China Automobile Circulation Association, in 2024, penetration rates for new energy vehicles have soared to 47.6%, with homegrown brands leading at an impressive 70%. In contrast, the joint venture brands are lagging with only a 7% penetration

This trend exacerbates the challenges faced by multinational automotive firms to regain their footing.

FAW-Volkswagen reportedly invests over ¥10 billion annually in its electrification transformation, achieving significant advancements in its electronic and electrical architecture, optimizing cost structuresHowever, the challenge remains—how to ramp up technology research and development and effectively attract a younger consumer demographic will be critical to the brand's successful transition.